PPIs are payment instruments that allow users to purchase goods and services or transfer funds based on the stored value, which represents amounts paid by cash, debit, or credit. PPIs can be issued as cards, accounts, wallets, or vouchers. Only banks can issue open system PPIs, while non-banks can offer closed or semi-closed system PPIs. Becoming a PPI issuer requires a minimum paid-up capital, maintaining funds in an escrow account, complying with KYI requirements, and obtaining authorization from the RBI. The application process involves submitting details about the proposed payment system and being issued a certificate to operate.

1. Pre-paid Payment Instruments (PPI) By RBI
Sooraj UN
Company Secretary

2. PPI at a Glance
PPI’s are payment instruments that facilitate purchase of goods and services,
including funds transfer, against the value stored on such instruments
The value stored on such instruments represents the value paid for by the holders
by cash, by debit to a bank account, or by credit card.
PPI’s can be issued as smart cards, magnetic stripe cards, internet accounts,
internet wallets, mobile accounts, mobile wallets, paper vouchers etc.
Closed System
Payment
Instruments
Open
System
Payment
Instruments
Semi-Closed
System
Payment
Instruments
Categories of PPI’s

3. Who can be a PPI
Banks Comply with Eligibility Criteria – provided mobile based pre-paid payment
instruments can be issued by those banks which has already been permitted to
provide Mobile Banking Transactions.
Non–Banking Financial Companies and other Persons - Only closed and semi-closed
system payment instruments are allowed.

4. Eligibility Criteria for a PPI
S No Particulars Remarks
1 Capital Requirement
Minimum paid-up capital of Rs. 500 lakh and minimum
positive net worth of Rs. 100 lakh at all the times.
2 Eligible formof Entities Only companies incorporated india.
3
Maximum value of pre-paid
instrument
INR 50,000/-. This may vary upon selection of categories.
4
Operation of Escrow Account for
non Banks
The escrow balance must be necessarily maintained with
only one scheduled commercial bank at any point
of time.
The migration from one bank to another, if case of need
should be completed in the minimum possible time and
with the prior approval of RBI.
5
PPI funds to be kept separate and
distinct
Settlement of funds with merchants should not be co-mingled
with other business.
6
Cautioning PPI holder about expiry
of PPIs
Caution PPI holder at reasonable intervals as the casemay
be
7 Validity
Shall possess a minimum validity period of six months
from the date of activation/issuance to the holder
8 KYC requirements Necessary KYC requirements to be satisfied.

5. Allowable credits/ Debits from Escrow Account
5
Credits:-
a. Payments received towards sale / reload of PPIs, including at agent Locations
b. Refunds received for failed / disputed / returned transactions
Debits:-
a. Payments to various merchants/service providers towards reimbursement of
claims received from them
b. Payment to sponsor bank for processing funds transfer instructions received from
PPI holders as permitted by RBI from time to time
c. Payment towards applicable Government taxes (received along with PPI
sale/reload amount from the buyers)
d. Refunds towards cancellation of PPI in case of PPIs loaded / reloaded erroneously
or through fraudulent means (on establishment of erroneous transfer /fraud).
The funds have to be credited back to the same source from where these were
received. These funds are not to be forfeited till the disposal of the case
e. Any other payment due to the PPI issuer in the normal course of operating the
PPI business (for instance, service charges, forfeited amount, commissions etc.)
f. Any other debit as directed by the regulator / courts / law enforcement agencies.

6. How to become a PPI
All persons proposing to operate payment systems and involved in the issuance of
Pre-paid Payment Instruments shall seek authorization from the Department of
Payment and Settlement Systems
The application for authorization shall be made in Form A addressed to the Chief
General Manager of Department of Payment and Settlement Systems at Central
Office of the Bank at Mumbai.
A non-refundable fee of Rs.10,000/- has to be accompanied with the application,
in the form of cash or electronic funds transfer or cheque or payment order or
demand draft drawn in favor of the Bank.
If the RBI is satisfied that the furnished documents, it may issue an authorization
certificate in Form 'B' to the applicant to commence or carry on a payment system
and specify the date on which the authorization shall take effect.

7. Mandatory details to be furnished with the application
Particulars of Payment System sought to be set up including process flow, technology to be used, security
features, inter-operability etc
Expected benefits to the financial system/ country from the operationalisation of the payment system
sought to be set up
Companies/firms/ entities will be associated with the applicant in setting up the payment system
Previous experience of applicant and associated companies/firms/entities in the payment systems area
Type of payment system proposed to be set up i.e. whether electronic fund transfer or payment card
based/ internet based/ mobile phone based
The payment system coverage - a particular region or the whole country
Does the proposed payment system seek to address the needs of any particular social/ economic
segment/s of the population
Method of settlement of payment claims, namely .whether gross, net or a hybrid method combining both
gross and net methods:
Name of the settlement agent for the payment system sought to be set up
Whether the applicant or settlement agent will act as a central counterparty to provide guaranteed/
secured settlement

8. Mandatory details to be furnished with the application
On which day will the beneficiary’s account be credited
What will be the risks in operating the payment system sought to be set up and how does the applicant
propose to mitigate them
The proposed customer grievances redressal machinery for the payment system sought to be set up
The time proposed to be taken to dispose customer complaints
Amount of finance required for executing payment system project
Sources of finances for executing the payment system project
Rate of return on investment expected from the payment system sought to be set up
How does the applicant propose to recover its investment and earn an income, that is , whether through
cash flows or by levying joining fees, security fees, annual/ operating charges etc
Please feel free to write to us in case of any queries - cssoorajnandan@gmail.com

9. Sooraj UN
Practicing Company Secretary
2B, Ground Floor, Anandham Apts
Anandhan Street, North Usman Road
T Nagar, Chennai – 600 017
E-mail to: info@unykscs.com
Mob: +91 9952983568
+91 9003256873
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